ECONOMY

Gov’t worries over CSF

The Community Support Framework (CSF) programs, one of the major sources of European Union funding, also serve as a favored weapon for political mudslinging, with the opposition usually accusing the government of not doing enough to ensure the country gets all of these funds or, as is the case today, of the new government blaming its predecessor. Before dealing at length with the latest round of recriminations, it would be useful to remember the main obligations and limitations imposed by the new implementation rules of CSFIII, which are particularly tight. The new rules, imposed by the EU and entered into force by a law passed by Parliament in 2000, stipulate that for a project to be considered for funding through CSFIII, it must be shown to be necessary and viable. In addition, all relevant studies (environmental, financial, technical) must be completed. If the project is approved by the European Commission, then the funds will start flowing. If not, the considerable preparatory work may end up being paid for by the state budget, if the project in question is a state-sponsored infrastructure project. The previous Socialist government that was forced to pass the regulations often criticized them as too bureaucratic and stifling. Up to a point, they are. The reason the conditions became so stringent, however, is because they were designed to combat widespread corruption. This included so-called supplementary contracts that inflated budgets, the implementation of projects whose only value was to satisfy the needs of politicians of all stripes, national and local, or contractors, or even worse, projects that were so badly executed as to collapse within a short period. This may appear an exaggeration, but it is characteristic of the logic and practices of those who have managed public money, whether of national or European provenance. As mentioned above, the approval of a project means that public funds – both the EU’s and the State’s – are made available. They must be spent within two years. Known as the «t+2» rule, this means funds approved in 2002 must be spent by the end of 2004. A few days ago, Deputy Economy Minister Christos Folias, in charge of CSF funding, and the new general secretary for investments and development Costas Mousouroulis presented a nightmare picture of the progress of CSFIII. According to Folias, there are two main problems areas: First, the 1 billion euros required for projects related to the Athens Olympics and, second, the fact that the Public Investment Program (PIP)’s revenues, comprising mostly non-absorbed CSFIII funds, are 1 billion euros less than planned. According to the 2004 budget planned by former Economy and Finance Minister Nikos Christodoulakis, PIP spending on projects co-financed with CSFIII is estimated at 5.3 billion euros, and revenues at 4 billion euros. Folias says revenues will not exceed 3 billion euros in 2003. However, expenditure is a function of revenue. If there is a lag in revenue, then spending will also be curtailed. Revenue shortfall Folias is rightly concerned about the prospect of a revenue lag due to a delay in the implementation of projects co-financed through CSFIII. Programs with already large delays include information society, health and regional programs which have run into difficulties with the EU Social and Agricultural funds. The problem has been exacerbated by the March 7 elections and the change in administration. Elections for the European Parliament and the Olympics will further delay the implementation of projects. The new government must accelerate the projects. If they are not included in the PIP, then there will be no financing and Folias’s worries will be a self-fulfilling prophecy. Folias also talked of a danger of losing CSFIII money due to the low absorption rate. However, careful observation reveals that, during the course of a CSF program, absorption accelerates each year. Thus, in 2001, Greece absorbed just 3 percent of the funds earmarked for the whole CSFIII program. In 2002, it absorbed a further 6 percent, raising the total absorption rate to 9 percent. The total rate rose to 20 percent by 2003. Thus, the goal of 35 percent absorption by the end of 2004, set by the previous government, appears not only feasible but may even be an underestimate. Inflows EU inflows arrive after the accumulation of demands for funds exceeding 500 million euros at a time. According to data presented by Christodoulakis, in response to Folias, in January and February 2004 the EU paid 950 million euros into CSFIII programs on the basis of the application submitted in December 2003. If no projects are incorporated into CSFIII and the existing projects are not implemented, Greece cannot ask for more money. Given that projects are being carried out, it is the duty of the present government to apply for more funds. There is another problem with the distribution of CSF reserves – totaling about 2 billion euros – among the various ongoing programs. These funds must be absorbed by the end of 2006. According to Folias, the distribution of funds will not take place before this fall. Christodoulakis has retorted that this distribution of the reserve funds has already been made by the previous government, in December 2003, and that the Commission has approved it, in principle. While it is the right of the new government to change priorities, Christodoulakis says, there will be no money inflows until it submits its revised plans. Concerning the reserves, which amount to just 4 percent of the CSFIII funds, available to Greece, there is no reason for further delay, which might result in problems with fund absorption. Implementing CSFIII in its totality will not be a walk in the park. The sheer size of the program, the multiplicity of projects, the bureaucracy and the inflexible regulations make its implementation very difficult. Folias and Mousouroulis, with their previous experience, as Euro MP and Commission technocrat respectively, must be aware that detailing the problems is necessary, not only to assign blame but also to take initiatives immediately. The Socialists may have made mistakes but the Commission will not make it easier for this government as a result.